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Wednesday, May 29, 2019

Top 5 ERP News and articles: Week 2019-22: ERP Failures

Checkout my book 'Selected Articles on ERP' on Amazon.com


Disclaimer: The articles in this blog post are those that I found interesting and relevant to the topic of ERP and technology in general. I have no commercial association with any of the entities mentioned in this article. I may be following a few of these entities on LinkedIn and even some of these entities may be on my LinkedIn or Social Media network. These articles are selected purely based on their relevance to the objective of this blog, to promote ERP. Finally, the summary is mine. While I stay close to the points in the articles, I also elaborate a few of them based on my understanding.

The Short URL for this post is http://bit.ly/ERP_Failures

The articles that we have so far covered in this series in Year 2019 are:

20. Week 2019-22: ERP Failures
21. Week 2019-23: ERP Critical Success Factors
22. Week 2019-24: ERP and Business Continuity Planing
23. Week 2019-25: ERP and Block Chain
24 .Week 2019-26: ERP On Cloud

The topic for this week is ERP Failures. This is an exciting topic for the learning opportunity they provide and the five selected articles present different perspectives to this issue. Sam Graham, in the first article suggests three strategies to avoid ERP Failure - Education, Consultancy and Training. He says that different strategies should be used to educate different groups of employees in the organization. The second article talks about (lack of) consumption and adoption as the causes for ERP failure. Users blame a host of items like software, customization etc, but at the core lies reluctance to adopt to the new system. The third article says that mismanagement of expectations and bad project management as some of the reasons for ERP failure. 

Ed Jordan, in the fourth article, says that Organizations can avoid ERP failure by ensuring that they are prepared for delay in schedule and escalation in costs. He also advises organizations to set their expectations correctly regarding benefits from ERP. The fifth article discusses 15 cases of ERP failures and the lessons that we can learn from them. The  three key lessons are, don't forget regulators, make sure your data is secure and clean and document your processes before you move to a new platform.

Great articles all of them. Have a decko and let me know what you think 

Views from Practitioners:

No one responded to my post on LinkedIn

Top five articles

1. How to avoid ERP Failures: Sam Graham: Third Stage Consulting Blog

https://www.thirdstage-consulting.com/how-to-avoid-erp-failure/?utm_campaign=meetedgar&utm_medium=social&utm_source=meetedgar.com

Three strategies to avoid ERP failure are to Education, Consultancy and Training. There are three different groups of people with different expectations that need to be educated in different aspects of ERP. C-Level Executives need to understand the potential of ERP. They should know what it can do and what it can't. This will help them know what they can expect from an ERP implementation and what they can demand from it. C-suite also need to know why they need ERP and the expected time it will take to implement it. Finally, since ERP will have Organizational Change Management impact, the C-suite also need to understand it.

The middle level management will be focused on the impact of ERP to their work area. They also need to understand that ERP implementation will require compromise, that is why C-level education is very important.

As a part of education the users will need to understand the integrated nature of ERP and how what they do have implications on other areas. Their knowledge will have to be augmented later with detailed training.

An ERP implementation requires two types of consultants. SMEs and Product specialists. The former will play key role in the initial stages of ERP implementation including product selection, implementation partner selection  etc. They will also be required to provide audit and oversight during the implementation. SIs will provide the product experts. A good product expert should not only provide multiple solution options but also suggest the best option.

Importance of training cannot be stressed enough. This is one area that ensures the success of implementation. However, this is an area where least amount of focus is given and also the first area to be impacted by budget cuts. It is important that training requires a special skill that not everyone possess.

Great article. Lots of insights. Thank you Sam Graham....

2. Do you know why your ERP System fails?: Mr.Vijay Venkatesh for Syscon Cronus

http://www.sysconcronus.com/know-erp-fails/

Mr.Vijay says that the root cause of failure of ERP is consumption and adoption. Users do not want to part with the ownership of their data and they give frivolous reasons like blaming the software, customization and training. Since the senior management does not understand ERP, they buy this version of the users. And ERP gradually fails. Mr.Vijay says that if you want an application that meets all your requirements, you will  have to develop a custom application suite. But an ERP system can provide most of the requirements at a much lower cost. Implementing an ERP application and expecting an 'a la carte' of options is an approach that is bound to fail.

Good article. Thank you Mr.Vijay.


https://www.academia.edu/28508065/CASE_STUDY_ON_FAILED_IMPLEMENTATION_OF_ERP_SYSTEMS

The five most basic reasons for which an ERP system fails are as follows:
  1. Non-realistic goals and expectations
  2. Failure to cope with organizational change
  3. No participation of stakeholders in the procedure
  4. Poor project management
  5. Failure to properly manage profits 
The article discusses five cases of ERP failure. Some of the lessons that we can learn from these failures are:
  1. Do not have tight timelines. Expect and plan for project delays and schedule slippage.
  2. Plan for business continuity. ERP system can fail. 
  3. Plan to handle peak demand, with or without ERP
  4. Language can be a major barrier. Ensure that the application can handle the local language.
  5. Volume testing / Performance Testing is very important. 
  6. Organizational change management is important. Ensure to get buy-in from all the stakeholders. 
  7. Training on new application across the board is very important.
Nice document. One small crib is the author keeps talking about 'Bing Bang' implementation

4. Four valuable lessons from Major ERP Fails: Ed Jordan for Manufacturing.net

https://www.manufacturing.net/article/2018/05/4-valuable-lessons-major-erp-fails

This is a very nice and logical article. Mr.Jordan has built each of the points with cogent arguments. He says that as per reports more than 75% ERP Implementations fail. to deliver. It can be easy to underestimate the time, effort and resources needed to successfully implement and maintain an ERP. However failure can be avoided by the following for actions.
  1. Expect extended timelines and plan accordingly: There is a 59% chance that your ERP implementation will exceed the planned schedule. Rushing to meet deadlines should never be a part of implementation plan. Remain flexible when it comes to project timelines.
  2. Set realistic budget expectations: 74% of ERP projects experienced cost overruns in 2016. To ensure that the project is within budget, you have to do two things. Benchmark your budget against similar projects and do not miss cost elements like staff training, bug fixing and data conversion
  3. Be patient and be prepared to problem solve: Use a phased approach to transition to new system. Test thoroughly before transition. Remember that testing and training on customizations will take even more time. 
  4. Know what you need: ERP can do somethings well and it cannot do some other things. Understand this difference.
As can be seen, the key is to set realistic expectation. I was fascinated to see that point 4 tied in nicely with the point on education that Mr.Sam Graham mentioned in the article #1 above. 

Thank you Mr.Ed Jordan for this nice article.

5. Fifteen famous ERP disasters, dustups and disappointments: Josh Fruhlinger and Thomas Wailgum for CIO.com

https://www.cio.com/article/2429865/enterprise-resource-planning-10-famous-erp-disasters-dustups-and-disappointments.html

This article details fifteen cases of failed or sub-optimal ERP Implementations. Some of the reasons for failure are:
  1. Unable to identify and handle expectations of key stakeholders including regulators
  2. Customer accounts were not migrated properly due to which some customers found that their accounts were not credited with the payments
  3. Different units of the business had different processes which needed to be standardized and this was not known at the start of implementation
  4. The implementation partner went bankrupt and there was no continuity
  5. Business did not understand or document their processes. The senior staff left the company taking with them the collective knowledge
  6. Incorrect data input into the system leading to GIGO phenomenon
  7. Supply chain debacles. Materials not available, not tagged correctly, not transferred in the right warehouse etc
  8. Project managers did not prepare risk mitigation plans. 
  9. Expectations mismatch. Customer promised the moon during the sales pitch.
  10. Customer unable to explain the business requirements in a timely manner (as per the product vendor)
  11. Non-availability of users empowered with decision making authority
In summary, don't forget regulators, make sure your data is secure and clean and document your processes before you move to a new platform.

Nice article. But I was confused by the chronological mismatch in some areas. This article is written in 2018, why is it talking about 2010?

The lessons are timely and timeless, though...

Additional Reading

1. Lessons from National Grid versus Wipro SAP Law suite: Eric Kimberling for Third-stage Consulting
https://www.thirdstage-consulting.com/lessons-from-the-national-grid-v-wipro-sap-lawsuit/

2. Three biggest failure cases of ERP Implementation:  Andrew King for ERP Software Blog
https://www.erpsoftwareblog.com/2017/05/3-biggest-failure-cases-erp-implementation-can-avoid-mistakes/

https://www.erpfocus.com/erp-failure-case-studies.html





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